Outspoken entrepreneur and owner of Tesla, Elon Musk, has today suspended vehicle purchases using Bitcoin due to growing climate change concerns around the cryptocurrency.
The electric car maker bought more than $1.5bn of the world’s most popular digital currency in February – but following the announcement environmentalists and investors have been public in their dislike for the decision.
Following today’s news, the price of Bitcoin fell by more than 10%.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
Ganesh Viswanath-Natraj is Assistant Professor of Finance at Warwick Business School said: “The claim of inefficiency is indeed accurate. Bitcoin’s transactions are authenticated via its proof of work system, in which miners compete to solve complex algorithms to authenticate transactions on the ledger.
“There’s no free lunch – the annual power consumption of authenticating Bitcoin’s blockchain is greater than that of a medium-sized country like Argentina. However, Musk’s tweet is at odds with his previous tweets encouraging investment in Bitcoin and adopting Bitcoin as a payments system. It is difficult to rationalise this reversal in sentiment toward Bitcoin given the energy inefficiency argument is not new: and scalability has been cited as the number one issue with Bitcoin payments for years. The large effects of Musk’s tweets on Bitcoin is direct proof that Bitcoin’s price exceeds fundamental value and is a bubble-driven asset.”